Article  |  September 28, 2026  |  SJHL

IRS Updates Per Diem Rates for 2026-2027: What Employers Need to Know Before October 1

If your business reimburses employees for travel, October 1, 2026 is a date you’ll want to circle on your calendar. That’s when the IRS’s newly issued Notice 2026-60 takes effect, updating the special per diem rates that businesses rely on to substantiate ordinary and necessary travel expenses. Getting these numbers right matters both for staying compliant and for making sure your reimbursement policies reflect the most current IRS guidance.

Here’s a practical breakdown of what changed and what you should be doing about it.

What Changed and What Stayed the Same

The IRS issues these per diem updates annually, but not every rate changes every year. For 2026-2027, here is what employers need to know:

• Transportation industry M&IE rates are unchanged: The special meals and incidental expense (M&IE) rates for transportation industry employees remain $80 for travel within the continental United States (CONUS) and $86 for travel outside the continental United States (OCONUS).
• Incidental expenses-only rate remains $5 per day: This applies to any CONUS or OCONUS travel locality and has not changed.
• High-low substantiation rates increased: This is the most notable change for most employers. Under the high-low method, the per diem rate for travel to a high-cost locality increased from $319 to $329, and the rate for all other CONUS localities increased from $225 to $230. The meal portions of those rates, $86 for high-cost localities and $74 for all other CONUS localities, remain the same.

High-Cost Localities: Notable Updates to the List

Employers using the high-low substantiation method also need to be aware of changes to the official list of high-cost localities, cities and regions with a federal per diem rate of $280 or more. The following updates apply beginning October 1, 2026:

• Newly added high-cost localities: Tucson, Arizona; San Mateo/Foster City/Belmont, California; Albuquerque, New Mexico; and Cody, Wyoming.
• Removed from the list: Panama City, Florida is no longer a high-cost locality.
• Changed high-season windows: Several existing localities changed the portion of the year during which they qualify as high-cost, including Napa and South Lake Tahoe, California; Aspen, Steamboat Springs, and Telluride, Colorado; Fort Myers, Florida; and others. These timing changes can catch employers off guard, so it is worth reviewing the full list carefully.

If your employees travel frequently to any of these areas, their applicable reimbursement rate may have changed even if the city was already on your radar.

What Employers Should Do Now

Per diem rates are a practical tool, but only when applied correctly. Using outdated rates, or the wrong rate for a given locality, can create compliance problems. Here are a few steps to take before October 1:

• Review your travel reimbursement policy. Update the high-low rates and any locality-specific rates your policy references to reflect the new figures.
• Audit your high-cost locality list. Cross-check the cities where your employees regularly travel against the updated list in Notice 2026-60. Pay particular attention to localities with changed seasonal windows.
• Communicate changes to employees. Employees who submit travel expense reports need to know what rates apply and when the change takes effect.
• Leverage the transition rules. Notice 2026-60 includes transition provisions for the last three months of calendar year 2026 under both the per diem and meal-and-incidental-expense-only methods. Make sure you understand how those apply to reimbursements paid during that overlap period.

We Can Help You Stay on Top of IRS Changes

Navigating IRS guidance updates like Notice 2026-60 may seem straightforward on the surface, but the details, especially when high-cost locality timing and transition rules are involved, can get complicated. At SJHL, we work with businesses of all sizes to make sure their travel expense policies, payroll practices, and tax positions stay current and compliant.

If you have questions about how these updated rates affect your business or want help reviewing your reimbursement policy, contact our office today. Our team is here to help.